Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist is the definitive guide to venture financings. This book is for anyone who wants the insider's guide to raising money, negotiating deals, and to know what really makes venture capitalists tick. Don't believe us? Check out these recommendations:

The adventure of starting and growing a company can exhilarating or excruciating.or both. Feld and Mendelson have done a masterful job of shedding light on what can either become one of the most helpful or dreadful experiences for entrepreneurs.accepting venture capital into their firm. This book takes the lid off the black box and helps entrepreneurs understand the economics and control provisions of working with a venture partner. - Lesa Mitchell, Vice President, Advancing Innovation, Kauffman Foundation My biggest nightmare is taking advantage of an entrepreneur without even realizing it. It happens because VCs are experts in financings and most entrepreneurs are not. Brad and Jason are out to fix that problem with Venture Deals. This book is long overdue and badly needed. - Fred Wilson, Union Square Ventures A must-read book for entrepreneurs. Brad and Jason demystify the overly complex world of term sheets and M&A, cutting through the legalese and focusing on what really matters. That.s a good thing not just for entrepreneurs, but also for venture capitalists, angels and lawyers. Having an educated entrepreneur on the other side of the table means you spend your time negotiating the important issues and ultimately get to the right deal faster. - Greg Gottesman, Managing Director, Madrona Venture Group I've been reading and loving Brad Feld's blog for years. He's one of my favorite venture capitalists on the planet. I'm delighted Brad and Jason have written the definitive book for entrepreneurs seeking to learn about raising and going through the venture capital process. - Bijan Sabet, Spark Capital Venture Deals is a must read for any entrepreneur contemplating or currently leading a venture-backed company. Brad and Jason are highly respected investors who shoot straight from the hip and tell it like it is, bringing a level of transparency to a process that is rarely well understood. Its like having a venture capitalist as a best friend who is looking out for your best interest and happy to answer all of your questions. - Emily Mendell, Vice President of Communications, National Venture Capital Association In my entrepreneurship class at Stanford, the number one topic is venture financing -- how it works and how (or even whether) to get it. There are no two better people to coach an entrepreneur through the venture process than Brad Feld and Jason Mendelson, and next to in-person guidance this book is the next best thing. I am planning to make this required reading for my class at Stanford. - Heidi Roizen, Fenwick and West Entrepreneurship Educator, Stanford University Technology Ventures Program I would highly recommend .Venture Deals. to any entrepreneur, venture capitalist, student, or casual reader who wants to get the .true scoop. on how venture deals come together and what the venture capital landscape truly looks like. The authors are not only veterans of the industry, but are willing to share their unvarnished views of what venture is all about. The reader will not find the insights shared here anywhere else. And, perhaps best of all, the authors write in an easily readable, casual style that makes the book quite fun to read. - Craig Dauchy, Cooley LLP Feld and Mendelson pack a graduate level course into this energetic and accessible book. The authors. frank style and incisive insight make this a .must read. for high-growth company entrepreneurs, early stage investors, and graduate students. Start here if you want to understand venture capital deal structure and strategies. I enthusiastically recommend. - Brad Bernthal, CU Boulder, Associate Clinical Professor of Law - Technology Policy, Entrepreneurial Law

Q: At a pub in Los Gatos, CA a casual conversation with some young, first time entrepreneurs lead to an interesting comment:
"…the business plan outlines our estimated (operational) expenses but how do I know an investor is not going to look at these numbers and say…’are you f’ing kidding me’ and  right then and there we can loose this guy (his interest)…"How can an entrepreneur build these projections most accurately and in a way that will maintain credibility with potential investors?  What could be defined as the "best practice" for entrepreneurs dealing with this subject?

A: (Brad) As I’ve said in the past, I’ve never met a financial plan for an early stage company where the revenue side was correct.  However, I’ve met plenty where the cost side was correct (or – at least – appropriate).  The key here is simple – you want to have a cost structure that makes sense, covers all the bases, but doesn’t assume a big revenue ramp to be supportable.

If you are in the very early stages (e.g. a few people and an idea), recognize that your investor is likely going to be funding you for about 12 months to see how things play out.  The biggest mistake first time entrepreneurs make is that they fall prey to the idea that they need to put together a five year P&L forecast and cash flow projection.  I can guarantee – with 100% certainty – that this model will be wrong.  As an investor, I don’t really care about this; rather I want to see how you are thinking about getting to “the next stage” of your business.  You get to define the next stage, what it’ll cost you to get there, and what things will look like when you get there.

If you are a first time entrepreneur, go find an experienced entrepreneur to act as a mentor.  She can be a first line of feedback your cost model and likely will know a few “financial people” that can help you put together a simple, yet credible model.  In addition, when you spend time with potential investors, don’t try to bluff.  Tell them it’s your first time building a model like this and that – while you had help – you know you lack experience and are looking for feedback.  Try to engage the investor in the process. Listen the potential investors feedback and iterate on your model.

Simple message – don’t be afraid to ask for help.

Q: At RealNetworks we always expensed (vs. capitalized) engineering expenses (as does MSFT).  What is your philosophy on this engineering accounting practice.

A: (Brad) Subject to approval by the auditors, I always encourage companies I invest in to expense their engineering costs. 

Regardless of the accounting treatment, I think it’s a bullshit practice to capitalize engineering expenses.  In an early stage company, this simply serves to obfuscate the reality of the P&L by transferring real expenses to an asset on the balance sheet which is subsequently depreciated over a multi-year period of time.  The result – investors and managers have to work harder to understand the P&L and the real economic dynamics of the business.  It gets even worse in a mature company, especially one that is public.

However, our good friends the auditors get in the way on this one and encourage some engineering (and R&D expenses) to be capitalized.  Oh well – we need to follow the rules.  But that doesn’t mean we have to like them.